An end has been declared by the APNU+AFC government to the 165 MW Amaila Falls Hydropower Project (AFHP).
In an interview with Stabroek News, Minister of State Joseph Harmon says that the government is focusing on an energy mix with natural gas as a prime component.
The US$858.1m AFHP had been the flagship project of the former PPP/C government but while in opposition, both A Partnership for National Unity (APNU) and the Alliance For Change (AFC) had had deep reservations about it over cost, feasibility and other matters. This opposition had resulted in the main investor, Sithe Global pulling out of the project on August 9, 2013. The government’s decision now to abandon the project could have repercussions for its access to funding from Norway under a forest protection deal and other sources.
Harmon said the AFHP is too costly to explore and the government does not have the financial wherewithal or intellectual property documents at its disposal. Given these circumstances, he said it would be virtually impossible to enlist a new investor and as such a decision was taken to look at other energy alternatives.
Asked specifically if that means that the government was not prepared to go out and find another investor, Harmon replied. “No. The point is are you going to give us money to do that?”
Harmon explained that with an estimated “US billion-dollar” AFHP project, government could not fund it on its own even if it accessed the US$80M that the Inter-American Development Bank (IDB) is holding through an agreement with Norway.
For the Government of Guyana, he explained, the case for producing energy through AFHP, is not as easy as many believe since there are myriad questions left unanswered and a fact-based assessment by consulting company Norconsult, highlighted these facts. The Norconsult report, which was meant to be a final study of the AFHP and commissioned under the Guyana-Norway partnership, was generally favourable towards the AFHP but the APNU+AFC government interpreted it differently
“The Government of Guyana has reviewed the report of Norconsult and posits three critical issues highlighted in the fact-based assessment of the AFHP. This was meant to be a fact-based assessment,” Harmon stressed.
“These are focused on one, the insufficiency of evidence both data and analysis to advance AFHP as the sole or primary hydro solution for energy at this point and time, secondly the design issues that have to be rectified, which has total cost and tariff implications and three the unbalanced risks to the government, including the international investment rating for Guyana, which propagates the risk for investing in Guyana as high,” he explained.
‘Hydro as back-up’
Harmon reminded that the consultants were tasked to deliver a fact-based assessment of the Amaila Fall Hydro Project, as part of a wider examination of the best options for Guyana’s transition from reliance on liquid hydrocarbons to renewable energy use of close to one hundred percent by 2025.
He said that critically absent from the report was an objective assessment on renewable energy options. “Options in the report therefore mainly looked at
alternative business model ‘options’ to advance ‘only’ the AFHP. There was also an absence of consideration for similar hydro projects as potential ‘options’. The report however recognizes that even in the case of AFHP there would be need for other hydro as back up and even a renewable energy mix were Guyana to satisfy its transition of close to 100% renewable energy by 2025,” Harmon asserted.
He noted an observation of Norconsult that Guyana will require an energy mix to meet its Paris agreement commitment, saying that it is encouraging and in line with what the Government of Guyana has been proposing to the government of the kingdom of Norway in the renewable energy transition roadmap. While Amaila was to be 165 MW, the projects put forward by the APNU+AFC government so far have been minuscule in comparison.
Reading from page seventeen of the Norconsult report, Harmon stressed, “The commitment of `some’ 100% emission-free/renewable energy use by 2015 therefore may not be fulfilled, especially if the increase in demand will follow the path indicated in the generation system expansion study of June 2016. To fulfil such commitment the required back-up thermal plant capacity will, if technically and logistically feasible, have to be switched from oil to biomass, PV solar facilities and or wind farms have to be installed at feasible locations. The insufficiency of evidence to advance AFPH as the sole primary solution for energy still remains a major concern to the govnerment of Guyana.”
Given the physical uncertainties, the inadequacies in the hydrology data, inconclusive water flows analysis and the three-year time frame required to resume project preparation for AFPH, the Minister of State argued that there is a strong case for the consideration of other hydro ‘options’.
“For example Kamaria (18MW), Tumatumari (152MW) and Kumarau (149MW). The outcome of this would provide the Government of Guyana with at least three easy to go alternative options. This is reinforced by the fact that Norconsult indicated that Amaila would require a backup, which points to the necessity for a minimum of two optionss for hydro at the same time. This would reduce the risk of Amaila’s inability during the dry season to produce less than the required MW output,” he said.
He added that “Having regards to the fact that the Norconsult report acknowledges that even in a pro AFHP scenario there would be a need for back up, the GOG is inclined to go for a mix as a less risky option to start with. The design issues have to be rectified (and) have total cost and tariff implications. Risk to energy production, MW output and the potential cost escalation due to design issues are at this time are too great and present financial reputational safety and other risks; most importantly they have cost implications that can affect the total cost and tariff. This revelation by the Norconsult report raises even more genuine concerns by the GOG. For this reason, the government can only consider the AFHP if all such issues are addressed and the true cost revealed to understand better the scope of financial and other requirements,” he added.
Citing examples from a dossier of documents he brought to the interview to support his government’s posture, Harmon pointed to the Norconsult report which noted “in the absence of details from the owner’s requirement including the minimum requirement of overall plant efficiency, which includes the hydraulic losses in the waterway. The power plant is required to yield a certain output at a certain headwater level with no maximum figure set for the corresponding turbine flow. “
He said that the evidence in the Norconsult report has actually amplified the APNU+AFC administration’s concerns about getting this project design and information correct.
“All issues relating to design and the production of a safe and sturdy plant is a necessary condition to sufficiently satisfy the people of the cooperative republic of Guyana to commit to a project of this nature. It would also be necessary to realize the true cost of delivering the plant that meets all the standards and allow the GOG and investor to predict tariffs, and preempt issues of maintenance and sustainability of the plant,” he posited.
“The unbalanced risks to the Government of Guyana, including the international investment rating for the country, which propagates the risk for investing in Guyana as high, presents grave challenges given the current economic and other realities at this time,” he added.
He believes that the APNU+AFC government “is vindicated in its concerns about the risks it would have to take in the AFHP” and maintains opposition to the unbalanced allocation of such risk.
According to Harmon, Norconsult found that “The original PPA (Power Production Agreement) had a risk allocation which was not well balanced in the sense that several major risks were not allocated to the party who was best equipped to handle the risks.”
Hence, the GOG accordingly was exposed to valid risks and could not expose the peoples of the cooperative Republic of Guyana to this.
Norway had appeared to favour the project and after the APNU+AFC government took office in May 2015, the two sides agreed in December 2015 for an “objective and facts-based” assessment of the AFHP for a decision on the way forward.
In Norconsult’s December 12, 2016 report, it was stated that the AFHP was the fastest way forward for Guyana to realize its green energy ambitions.
Aside from hydropower being the best green energy project for the country, Norconsult pinpointed Amaila as the best hydropower prospect and adverted to 2012 findings by Verlyn Klass.
Norconsult said Klass did an evaluation of the known alternatives and the larger ones were resized to match the projected energy demand here.
In addition to the Amaila Falls, Klass’ study considered the Kaieteur Falls, Turtruba Falls, the Upper Mazaruni, Arisaru and Oko Blue. Based on technical/economic/environmental/social considerations, Amaila scored 100 in the rankings. Kaieteur Falls was next with 74 with Turtruba at 57 and Upper Mazaruni at 47.
Norconsult said that a more recent study, ‘Guyana’s Power Generation System Expansion Study’ by Brugman SAS (June 2016), also concluded that hydropower was the lowest cost option. This study pegged Amaila Falls as the second lowest cost option of the hydro plants in the study, slightly higher than Tumatumari.
However, the Tumatumari Project has a significantly lower plant load factor – 50 to 55% versus 70-75% for AFHP. This means that more back-up capacity would be needed if Tumatumari was chosen.
Norconsult added, “The Tumatumari reservoir would inundate 6-20 times larger area than the planned reservoir of AFHP with more extensive environmental projects.”
The report also said that “By restructuring the financial model, the risk for Guyana’s economy can be reduced. The annual payments from GPL may possibly be reduced by 20%, which are significantly lower than the current fuel costs paid by GPL for its oil fuelled generation”.